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| Fig. 1: Image showing gasoline shortages. (Courtesy of NARA. Source: Wikimedia Commons) |
By looking at the 1973 Arab oil embargo, this report seeks to look at the consequences of a nation using oil as a political weapon.
On June 5th 1963, war broke out in the Middle East when Israel conducted a series of surprise attacks against Egyptian airfields as a result of the mobilisation of Arab forces next to the Israeli border. [1] As the war progressed, Syria, Jordan and Iraq joined the Arab forces. The war resulted in Israels victory. Through this war Israel acquired the Golan Heights, the West Bank, the Sinai Peninsula and the Gaza Strip. [2]
On the 6th of October 1973, another war broke out. Egypt and Syria both decided to launch an attack on two territories, the Golan Heights and the Sinai Peninsula. This strike was conducted by Egypt and Syria in hopes of retrieving their lost territories. During the 27th of January, Egyptian forces requested that the Soviet Union provide them with jets, missiles, and other military equipment. Later, Israel mirrored the Soviet-Arab links by partnering up with the United States, thus creating an ostensible proxy superpower conflict. [3]
Throughout the war, both the Soviet Union and the United States created ceasefire proposals. However, due to conflicts of interest, these ceasefire proposals constantly deteriorated. Soon, the Arab nations decided to take an economic approach to the war by establishing an oil embargo to enemy states. [1]
On the 17th of October, Arab nations met in Kuwait under the unified name of the Organization of Arab Petroleum Exporting Countries (OAPEC). OAPEC announced that they are planning to begin supply cutbacks to foreign nations. [4] OAPEC nations decided upon three primary regulations. First, they would raise the price of oil fourfold from 3 dollars to 12 dollars per barrel. Second, nations that are neutral or hostile would experience a total oil embargo. Third, nations that have changed their foreign relations to support the OAPEC would receive a 5 per cent monthly decrease in Arab oil until Israeli forces give Arab nations back the territories they lost during the Six Day War. [5]
As a result of the 1973 oil crisis, all industries that used oil as an input good suffered. For example, many French automobile companies had difficulties selling vehicles due to the decreased demand for oil. These decreased revenues made the French automobile industry suffer a blow. Citroen, a previously prospering car producing company, was forced to file bankruptcy on June 1973 due to a lack of profits and growing loans. Alpine, another French car company, had decreased its sales by 40% from 1481 cars in 1972 down to 922 cars in 1973. In fact, many French car producers had to stop vehicle production for multiple weeks. Signs such as the one in Fig. 1 started to appear throughout many cities in Europe. [6]
The airline industry also suffered a serious economic blow. In the United Kingdom, the prices per flight increased twofold, and many corporations were forced to cut flights that lacked a certain number of passengers. In November of 1973, English airline companies were forced to completely cut flights over the Atlantic Ocean. [1]
There were many government actions put in place to limit gas spending. For example, the Netherlands implemented a ban on private driving on Sundays (public transport was still available). In November of 1973, the French government announced that all living and corporate headquarters must maintain a temperature of 20 degrees Celsius indoors. Due to weather conditions, many French citizens did not abide by the regulation, leading to the creation of an inspection department that would be responsible for conducting sudden intrusions in offices and factories to measure the temperature and assess whether the facility follows the regulations put out by the government. These inspections continued until France regained a constant flow of oil into its nation, which took place in March 1974. [1]
One of the biggest lessons from the Arab Oil Embargo is the power of a monopoly over its consumers. Even though the impact of the embargo on European countries seems grave, it undoubtedly could have been worse. For this reason, it is critical for nations to strive towards decreased dependence on singular natural resources, imported from abroad. [1]
© Maxim Serebriakov. The author warrants that the work is the author's own and that Stanford University provided no input other than typesetting and referencing guidelines. The author grants permission to copy, distribute and display this work in unaltered form, with attribution to the author, for noncommercial purposes only. All other rights, including commercial rights, are reserved to the author.
[1] F. Venn, The Oil Crisis (Routledge, 2002).
[2] A. S. Cooper, The Oil Kings: How the U.S., Iran, and Saudi Arabia Changed the Balance of Power in the Middle East (Simon and Schuster, 2012).
[3] D. Hellema, C. Wiebes, and T. Witte, The Netherlands and the Oil Crisis: Business as Usual (Amsterdam University Press, 2004).
[4] K. R. Merrill, The Oil Crisis of 1973-1974: A Brief History with Documents (Bedford/St. Martin's, 2007).
[5] R. K. Goel and M. J. Morey. "Effect of the 1973 Oil Price Embargo: A Non-Parametric Analysis," Energ. Econ. 15, 39 (1993).
[6] V. Keegan and P. Hillmore, "From the Archive, 13 November 1973: Opec Oil Embargo Leads to Global Fuel Crisis," The Guardian, 13 Nov 13.
